Milan Cacic
October 08, 2021
Money Economy Commentary Trending Weekly updateARE WE IN THE THIRD INNING OR SEVENTH INNING?....
Growth has been pretty significant last few quarters. However, we are starting to see global economic growth roll over. I want to be clear: the economy is still growing but not as fast as we expected. Between the rise in Delta variant, China's regulatory crackdown and some moderation in fiscal policy, the slowdown is obvious. It appears the market has noticed as well. Investors are moving to companies with strong balance sheets and reliable cash flows.
Goldman Sachs had just reduced their Q3 GDP forecast from 5.25% to 3.5%, and while similar Q3 economic growth downgrades have been coming fast and furious, it's important to note that the economy is still on solid ground. Household savings rates are high, and the labour market continues to expand. When we finally do get through COVID-19, there will be a considerable amount of restocking because of low inventories from all the supply chain disruptions.
Things to watch over the next month that could have significant effects on our growth outlook:
- Pro-growth US stimulus package;
- Chinese policy shifts;
- Japanese stimulus based on the leadership change;
- a left-leaning coalition party in Germany (they will most likely more proactive in fiscal spending);
- a peak in COVID-19 cases.
The bottom line is that growth is slowing, however, there are several political and economic developments over the next few months that could have a significant effect on our outlook. We will continue to monitor the situation closely.
I've also included a piece from our CIBC economics team entitled "Jay Powell can’t build a car".
As always please give us a call anytime if you have any questions.
Have a great weekend.
Milan